Understanding Royalty Free Music: The Basics of the Music Industry, Copyright & Licensing

To cover this topic properly, and to make this series as comprehensive as possible, I need to make sure that you have a good understanding of the structure of the music industry. This means we need to briefly cover a couple of points first.

The Music Industry, a whistle stop tour!

“The Music Industry” is made up of numerous niche music-related industries that combine to form it as a whole. For example, royalty free music is part of the independent music industry.

Broadly speaking, the music industry is split into two main sectors: –

• Mainstream Sector (The Big Four)
• Independent Sector (many small record labels and localised composers)

The mainstream industry is controlled and governed by the four major record labels: –

1. Universal Music Group
2. Sony Music Entertainment
3. EMI Group
4. Warner Music Group

These companies control the kind of artists that you hear on the radio, watch on TV and listen to on your iPod, whereas the independent industry is made up of many composers, unsigned (by a major label) bands and artists.

Even though the two sectors are distinctly different they share a common thread in the fact that they both generate revenue through sales of music or licensing, which is only possible because of copyright law. We may revisit this later in more detail, I just want to introduce the concept of copyright and licensing at this stage.

OK, so copyright in music is more complex than the outline I am about to give, but it is a basis for further study and gives you an introduction.

In relation to music, copyright is owned by the composer / creator. This includes copyright of the composition, arrangement, lyrics and sound recordings. This ownership gives the copyright holder(s) exclusive rights to create and distribute copies of the music on their terms. This can be for free but is usually for an appropriate license fee.

When you buy a CD / download from a store like Amazon.co.uk you are purchasing a license, you do not buy the copyright in the audio product, you just have a restricted license which enables you to listen to it.

When music is used for anything other than personal listening, a license agreement should be supplied. This is a legal document supplied by the copyright holder(s) giving permission for certain uses of the music, mostly for an exchange of money. The document should also detail allowed usage and any restrictions.

The major labels have total control over their artists’ works because the artist is required to give away or assign most of their copyrights exclusively to the label. This is why it is prohibitively expensive to include a known mainstream artist, band or composer in your corporate video, advert or film. You can only license it from the major label. I have heard license figures of £300,000 GBP for one mainstream track in one TV advert.

On the other hand, the many independent composers whose music you might not have heard of are happy to collect smaller sums of money for less restrictive licenses for use of their music through independent distributors, including royalty free music sellers. As the copyright owners, they are able to provide many distributors the right to offer licenses of their music in return for a share of the revenue collected. This means music can be offered for lower license fees and made available to a much wider audience / user base. This is becoming more prevalent with new media uses and developing / converging technologies.

Copyright is vastly more complicated than what has been discussed here, but just keep in mind that the owner of the rights is ultimately the one who can authorise free or paid licensing of their music.

To conclude this post, here are some of my own opinions about copyright in the 21st century…

In my opinion, I think that copyright law is outmoded and desperately in need of change. For the mainstream industry it has enabled vast wealth to be created over the years, however, in a modern digital world, I think the fact that copyright law differs from country to country is counter-intuitive to creating a global internet economy and community.

In years gone by, the major labels have had the power of financial investment… they invest in a composer / band to get them recorded, pressed to vinyl / CD, marketed, distributed etc. However, in this current digital age, recording and distribution is readily available to independents meaning that the balance of power is slowly starting to even out. Granted, you can not get the same kind of mass coverage without money behind you, but more and more independents are beginning to leverage the lower cost technologies, the immediacy of online platforms and the long tail business model to bypass labels and create an independent music income.

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As always, I would like to hear your opinions and views so feel free to leave your comments and Retweet, bookmark or ShareThis post. 🙂